Dental Practice Loans: Where to Get Dental Practice Financing

Dentists use dental practice loans for working capital like payroll or major projects like purchasing a facility. Small Business Administration (SBA) loans for dentists have the best rates and longest terms but take 30 to 90 days to fund. Alternative loans have higher rates but are quick to fund and easy to qualify for.

OnDeck, which sponsored this article, is our recommended alternative dental practice loan provider. It offers rates for prime borrowers starting at 9.99% and can provide funding in as little as one business day. OnDeck’s online application takes a few minutes, and you can prequalify for up to $500,000 the same day.

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Types of Dental Practice Loans at a Glance

To help you learn more about working capital loans and how to choose the right one for your dental practice, we’ve put together a free, five-minute webinar. This webinar guides you through the process of selecting a financing solution that fits the needs of your business.

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Types of Dental Practice Loans

There are multiple business loans you can get for your dental practice. For quick funding, alternative term loans and lines of credit are the best options. If you can wait for at least 30 days, then an SBA loan is good for long-term financing. Conventional bank loans and dental equipment financing take a few weeks for funding but require a down payment and collateral.

The five most common types of dental practice loans are:

• Alternative term loan: Alternative business loans offer up to $500,000 in funding and have repayment terms up to three years. They are the best financing option for dentists needing funding quickly to focus on their business. Loan proceeds are best used to furnish new offices, expand to new locations, or other large projects.
• Alternative line of credit: Alternative lines of credit can get a dental practice funding up to $100,000 within a few days of applying. Lines of credit are revolving so that you can borrow funds repeatedly after repayment. This makes them best for financing regular expenses like payroll, supplies, inventory, or utilities.
• SBA loan: SBA loans offer the longest terms, lowest rates, and largest borrowing amounts we evaluated, making them a great fit for financing larger projects like acquisitions. You can get up to $5 million, repaid over as long as 10 years, but the application and funding process takes at least 30 to 90 days to complete.
• Conventional bank loan: A conventional bank loan is the best option if your business already has an established relationship with the bank. It can take a few weeks to get funded, and the terms and financing product offered will vary from one lender to the next. Conventional bank loans aren’t covered in this guide.
• Dental equipment finance: Dental equipment financing can also be an option for your business when purchasing expensive imaging and X-ray machines. However, the financing options are limited and differ depending on the equipment you finance, so the option isn’t covered in this article.

With the needs of dentists looking for dental practice financing in mind, we focused on the alternatives that can get them the fastest funding speeds on financing with several good use cases. OnDeck, which offers a dental practice loan up to $500,000 and a line of credit up to $100,000 can get you funded in one to three days after you complete its 10-minute online application.

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Alternative Dental Practice Loans

Alternative dental practice loans are high-interest, short-term loans you repay within one to three years. Dentists often use these loans for marketing, the purchase of new equipment, lab supplies, or other working capital dental practice needs. They can be an excellent cash flow solution if you’re getting off the ground or if you need cash while waiting for insurance payments to clear.

Alternative Dental Practice Loan Rates

The alternative dental practice loan rates you can expect are:

• Average expected annual percentage rate (APR): 30% to 50%; can be as low as 9.99% for prime borrowers
• Prepayment penalty: None
• Origination fee: 0% to 5%

The alternative business loan rates can compete with traditional lenders for the best borrowers. This means that your dental practice can qualify for rates as low as 9.99%. However, the average expected APR is between 30% and 50%. There is also an origination fee that differs by lender from 0% to 5%.

Alternative Dental Practice Loan Terms

The alternative dental practice loan terms you can expect are:

• Loan amount: Up to $500,000
• Repayment term: Three to 36 months
• Repayment cycle: Weekly
• Time to funding: One to three days

With an alternative dental practice loan, your business can get funding up to $500,000. This covers most remodeling efforts, equipment purchases, or other major projects for a dental practice. You also have longer repayment terms up to 36 months, compared to a line of credit, with funding available for your business in one to three days after approval.

Alternative Dental Practice Loan Qualifications

The alternative dental practice loan qualifications you will need to meet are:

• Personal credit score: At least 600
• Time in business: At least one year
• Annual business revenue: At least $100,000

Alternative lenders often qualify you after you complete their online application process. This speeds up the time to get funding but also means that you must meet their minimum loan requirements to get funded. You can expect a minimum credit score requirement of 600, at least one year in business, and more than $100,000 in annual revenue to qualify. This requirement is the same for a business line of credit, but lower than an SBA loan.

Alternative Dental Practice Loan Application Process

The application process with an alternative lender like OnDeck is far less document-intensive than with a traditional bank or SBA loan provider and takes a fraction of the time and energy. Applying for a dental practice loan only requires basic personal and business information, and you can complete the process online in a few minutes.

The streamlined application process with alternative loans is even more of a time saver for higher net worth dental practice owners. If you have stakes in multiple businesses, practices, or own rental properties, an SBA loan will require complete financial documentation for all of those entities. Applying with an alternative lender is comparatively simpler and requires fewer documents from your dental practice.

The entire alternative loan funding process takes one to three business days, which gives your practice a much faster solution than you would get from a lengthy SBA loan application process. Alternative dental practice loans are flexible and can help you solve unexpected problems like replacing a periapical X-ray so that your operatory room isn’t down.

Where to Find Alternative Dental Practice Loans

Most online lenders will offer alternative loans to dental practice owners. Our recommended alternative dental practice loan provider is OnDeck, which can fund you up to $500,000 in as quick as one business day. Its online application can take less than 10 minutes to complete.

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Alternative Dental Practice Line of Credit

Alternative dental practice lines of credit offer funding for short-term working capital expenses like payroll, utilities, smaller repairs, and other expenses incurred while doing business. The line of credit is revolving, which means you can borrow again once you repay the balance, making it an excellent source of funding when you need it.

Alternative Dental Practice Line of Credit Rates

The alternative line of credit for dental practice financing rates you can expect are:

• Expected Average APR: 20% to 40%; can be as low as 13.99% for prime borrowers
• Prepayment penalty: None

With a line of credit you’ll have higher starting rates, but lower overall rates than a term loan. This is because you only pay interest on the funds you borrow. Borrowers with excellent qualifications can get rates as low as 13.99%. However, you can expect an average APR to range between 20% and 40%.

Alternative Dental Practice Line of Credit Terms

The alternative line of credit for dental practice financing terms you can expect are:

• Loan amount: Up to $100,000
• Repayment term: Up to 12 months
• Repayment cycle: Weekly or monthly
• Time to funding: One to three days

With a line of credit, you’ll receive a smaller funding amount than you could get with a dental practice loan. However, the line of credit is often revolving so, as you pay back, the principal funds become available again to borrow. This also results in shorter repayment terms up to one year. However, you can still get funding in one to three days.

Alternative Dental Practice Line of Credit Qualifications

The alternative line of credit for dental practice financing qualifications you will need to meet are:

• Personal credit score: At least 600
• Time in business: At least one year
• Annual business revenue: At least $100,000

The qualification requirements for a line of credit are the same as a dental practice loan. You’ll need a credit score of at least 600 to qualify with a year or more in business. Your business will also need to be generating at least $100,000 in annual revenue, which is a major deciding factor in the amount of funding you will receive.

Alternative Dental Practice Line of Credit Application Process

The application process for an alternative dental practice line of credit is simple. You must enter some basic personal and business information along with the funding amount you need. Then, you’ll connect your business bank account or upload three months of your most recent bank statements. The application is now complete, and you can get an approval decision as soon as the same day with funding one to three days later.

Where to Find Alternative Dental Practice Lines of Credit

OnDeck offers an alternative dental practice line of credit up to $100,000 that you can apply for in 10 minutes. You can get repayment terms up to one year, with starting rates of 13.99%. You’ll need a personal credit score of at least 600, one year or more in business, and $100,000 or more in annual revenue to qualify for funding in one to three days.

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SBA Loans for Dentists

SBA loans for dentists are the most affordable financing option you can get. This is because while you borrow the money from a traditional loan provider, the loan is guaranteed by the SBA. These loans are therefore less risky for your lender and will have lower rates than an alternative loan.

SBA loans also have longer repayment terms than alternative loans, making them an excellent financing product if you want to buy large equipment or commercial real estate. However, they aren’t a good fit for everyday working capital needs or unexpected expenses, because it can often take 30 to 90 days or longer to get funded.

SBA Loan Rates

The SBA loan rates you can expect are:

• Interest rate: 8% to 11%
• Prepayment penalty: None
• Origination fee: 0.5% to 3.5%
• Loan packaging fee: $2,000 to $4,000
• SBA guarantee fee: 2% to 3.5%

SBA loan rates are the lowest we evaluated, ranging from 8% to 11%. However, these rates extend over several years, increasing the total cost of the loan. There are also origination, loan packaging, and SBA guarantee fees that are required. This makes an SBA loan an expensive option if you only need it for short-term funding, compared to a term loan.

SBA Loan Terms

The SBA loan terms you can expect are:

• Loan amount: Up to $5 million
• Repayment terms: Up to 10 years; 25 years for real estate
• Repayment cycle: Monthly
• Time to funding: At least 30 to 90 days

The terms of an SBA loan extend up to 10 years with up to $5 million in funding, making it a great dental practice financing option for expansions and acquisitions, compared to other alternatives for dentists. However, funding can take a long time because of the underwriting process and paperwork requirements, so dentists need to be comfortable waiting at least 30 to 90 days for funding.

SBA Loan Qualifications

The SBA 7(a) loan qualifications you will need to meet are:

• Personal credit score: At least 680
• Annual revenue: At least $120,000
• Collateral: Typically required
• Down payment: At least 10% to 20%
• Time in business: At least two years

Because the SBA partially guarantees the loan, there are certain minimum qualification requirements you must meet for approval. Your lender may also have requirements based on its own standards, besides those of the SBA. You’ll need a personal credit score of at least 680, with $120,000 or more in annual revenue, and at least two years in business to qualify.

As a dentist, you’re already a great borrower for most lenders because of your high-income potential. When you go to your local bank, lenders recognize your income potential and weigh it along with other normal qualification requirements.

SBA Loan Application Process

The SBA loan application process requires more planning than an alternative loan. Closing an SBA loan can often take two to three months, and it can be invasive. Your lender will keep you busy gathering documents while you wait for funding. After your initial application submission, your lender will need the following documents for each business you own:

• Ownership information
• Business licenses
• Year-to-date (YTD) balance sheet
• YTD profit and loss (P&L) statements
• Business history & overview
• All business leases
• Projected financials for one to three years
• Business tax returns for the last two years
• Personal tax returns for all 20% or higher owners for the last two years
• Resumes for all 20% or higher owners

The additional documents needed if purchasing another practice from the acquired office are:

• Current balance sheet
• YTD P&L statement
• Business tax returns for the last two years
• Proposed purchase agreement
• Schedule of inventory, equipment, fixtures, and other assets

Once you submit your documents, you’ll go through two approval processes. First, you need SBA approval for it to guarantee the loan. Then your lender has to approve you through its own underwriting process. This combined process can take up to 90 days, depending on the bank and your business structure.

The entire process can require multiple trips to your bank and many phone calls with your loan officer. This could take you away from your practice and stop you from focusing on growing your business.

Where to Find SBA Loans for Dentists

Dentists can find SBA loans through traditional banks and other lenders. You might get an SBA loan at the bank you have a relationship with, or at a national or regional lender. The best thing to do is to ask the bank what SBA loans it offers.

Which Loan Is Right for Your Dental Practice

With an SBA loan, you can expect to get the lowest rates, but a dental practice loan with a lender might carry a smaller total cost of capital because repayment terms are much shorter than options like SBA loans, which last for 10 years. How quickly you plan on repaying the loan is a major deciding factor between these two loan options.

“The most important loan attribute for a dentist is the ability to pay back the loan,” said Dr. Emily Letran. “When you buy a new dental practice, you should complete a cash flow analysis to determine if you will have enough cash flow to support the new loan, and how fast you can repay it. Dentists have their pick of loans because of their ability to earn a great income, but they need to know how the loan terms and total cost of capital will impact their practice.”

The dental practice loan you choose will also depend on what you plan on using the funds for. If you’re looking to finance commercial real estate or large pieces of equipment, then an SBA loan will be your best bet. However, if you need quick working capital and don’t want to deal with the headaches of a traditional loan process, then alternative financing is the way to go.

An established dentist office can qualify for either dental practice loan. But if your practice is new or your credit score is being weighed down because of high student loan balances, then an alternative loan from OnDeck is more likely to meet your needs. It can fund you for up to $500,000 in as quick as one business day if you have a credit score of 600 or higher.

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Most Common Uses for a Dental Practice Loan

Many small businesses will need access to financing from time to time. Since dental practices have strong cash flow and profitability, their financing needs center on major purchases like commercial real estate or equipment. However, dental practice owners will also need financing for short-term working capital needs.

1. Dental Practice Financing for Acquisitions

Dentists often purchase or consider purchasing a practice from another dentist. For some dentists, this will be their first practice, but more often it’s a second or third practice to grow an existing business.

Dentists can plan practice acquisitions out with plenty of time for both parties. This happens when the seller is retiring or moving to a new area. In the seller’s case, this means getting all the financials prepared for the buyer and addressing any underlying concerns that may exist. For the buyer, this may mean lining up acquisition financing like an SBA loan to facilitate the purchase.

However, dental practice acquisitions are sometimes short-term opportunities. The seller might be an estate that is settling the affairs of someone deceased, or some other financial hardship might trigger the sale. There are plenty of scenarios like these where the sale takes place in a shorter time frame.

In these cases with hastier sales, the buyer may not have time to line up long-term financing. They may find that an alternative loan will help them complete the acquisition in the seller’s time frame. Dentists can always refinance a dental practice loan at a later date if they want a longer repayment term.

2. Office Remodeling

Like any small business owner, dentists may need to renovate or remodel their offices. Knocking down walls to create a more spacious layout, moving wiring, bringing plumbing up to code, installing air conditioning and ventilation systems, repaving the parking lots and building awnings, or updating the decor can all take a significant amount of capital.

Besides these improvements, dentist offices have many perks for their patients. For example, your patients expect your office to have televisions in every operatory to put them at ease and help pass the time, and they want a waiting room that does the same. These aren’t cheap upgrades and often require financing.

Dentists will plan some of these projects out and have time to save for the expense or get long term financing. Other projects may pop up as a surprise and require capital more quickly. Also, even if you plan your remodeling or renovations, long-term financing can require so much paperwork, it won’t seem worth it.

For example, SBA loans will often require lender approval of the contractors you work with, which includes verifying their payment schedules and contractors’ insurance. It can be a lot to coordinate and create a bunch of paperwork that your contractor might find cumbersome. If you know you’ll have the cash flow to pay off the loan within three years, then an alternative loan might be the easier and more efficient choice.

3. Expansion or Relocation

There are two main expenses involved with expanding or moving, the cost of the new facility itself and the cost to remodel. Whether you need to move your dental practice because your lease is expiring or you need to open a new location or satellite office, a business loan can help you manage the costs of the transition.

You must fund the operations of a new facility before you bring in any revenue, such as hiring new staff. While revenues from the new office may be able to sustain these expenses, dentists usually require financing to get the new office up and running.

According to the husband and wife team of Dr. Dustin Cohen and Dr. Stacey Cohen of The Practice of Beverly Hills, expanding your practice brings a whole new list of expenses. Besides remodeling your new office, which costs between $80 to $100 per square foot, you must prepare for these additional expenses:

• Rent of new location
• Utilities
• New staff salaries
• New equipment for each new operatory
• New lab equipment
• Dental supplies
• Office supplies
• Advertising
• Computer and information technology (IT) equipment & support
• Expand your current insurance
• New payroll and income taxes
• Business license

4. Marketing & Advertising

Marketing and advertising are critical when you open a new office, expand your patient rolls, or offer new procedures or treatments. While marketing might be mission-critical, it’s not cheap. Whether your business is engaging in online marketing with paid advertising, or you need physical advertising space like billboards to grow your practice, the costs can add up quickly.

Here are a few of the marketing and advertising strategies that a dental practice may consider:

• New website
• Local search engine optimization (SEO) efforts
• Paid advertising on Google
• Paid advertising on Facebook
• TV commercials
• Billboards

Every dollar you put into marketing your dental practice should pay dividends. Short term borrowing to launch a new marketing initiative can pay for itself through an expanded patient roster or by driving existing patients to higher margin cosmetic or elective procedures.

Dental Practice Loans for Bad Credit Borrowers

Growing school costs often cause dentists to get private loans to either pay for tuition or at least pay for living expenses while in school. As a result, recent graduates from dental school have an average of over $200,000 in debt. These private loans can handicap your borrowing ability. For example, they can come due before you’ve got your practice off the ground, and they often hurt the credit of many dentists who can’t yet afford the payments.

Other dentists may have bad credit from unexpected life events or from poor financial decisions. Regardless of the reason, it is difficult to borrow for a dental practice when you have bad credit. While you’re likely to be a high-income earner, you also have a history of poor financial management. This is risky for any lender.

Traditional lenders, in particular, will struggle to offer dental office loans if you have bad credit. In fact, you can’t qualify for an SBA loan if your credit score is less than 680. Your only option might be a bad credit business loan, where minimum credit score requirements can be as low as 500. If your credit is even worse than that, you likely must repair your credit before getting financing.

Benefits of an OnDeck Small Business Loan for Dentists

An OnDeck loan can benefit your dental practice by giving you fast funds to fulfill any of the needs discussed throughout this article. You can fill out an application within 10 minutes and get up to $500,000 in as little as a day.

An OnDeck dental practice loan has four main benefits:

1. It’s faster than a bank loan: An SBA loan can take up to 90 days or more to fund. OnDeck can get dental office loans funded in as little as one to three days.
2. It’s easier than a bank loan: OnDeck’s online application takes a few minutes and syncs with your accounting software and bank account, which keeps paperwork at a minimum.
3. It offers competitive rates for prime borrowers: If you qualify as a prime borrower, your rate could be as low as 9.99%.
4. It also offers a small business line of credit: Ideal for those practices who want credit if the need arises, but don’t want to pay interest on a term loan to hold money in the bank.

Lenders Want to Work With Dentists

Small business lenders view dental practices as safe businesses with steady revenue streams and healthy margins. They view the dental industry as a safe sector that leads to high, stable incomes and high net worth individuals.

Lenders have good reasons to feel confident when lending to dental practices. As the chart below shows, the SBA finds that dentists have some of the lowest failure and charge off rates in any industry. Even within the successful medical industry, dentist offices stand out as top performers.

With industry charge off rates under 1%, dentists who own their own practice can be more selective about the small business lenders they work with and the financing they take out. Many small business owners decide they want to be selective about the rates and costs of their loans, but others are likely to prioritize speed and simplicity. As a dental practice owner, you can shop around and be as selective as you like.

Bottom Line

Dentists who own a practice will qualify for most types of small business financing. An SBA loan will probably result in the lowest monthly payment, but SBA loans have arduous application processes and can take months to get funded. Alternative loans will carry a higher APR, but the total cost of capital could end up being less.

Prime borrowers can qualify for up to $500,000 with OnDeck at rates as low as 9.99%. Dentists can complete OnDeck’s online applications in a few minutes and get funding for their dental practice in as little as one day.

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